[BillPaay]

Yesterdays Bank Holiday in the UK proved to be a tough day for the bulls. WTI front month broke $70 support level and touched a low of $69.15 after trading a high of $73.35. This mornings action is one of bargain hunting and a bit of short covering, a close over$ 72.25 would be needed to steady the market and confirm near term bearish view is off base. However, with the action the past few days only a close over $75 would get us bullish again for the rear term. Expect trading to be volatile over the next few days as we look for some idea of demand and supply in this weeks inventory numbers. It is possible that unless we see some exciting bullish surprises in the numbers the market could move to the lower end of the recent range of $65-$75. It would be wise to keep an eye on the RBOB contract as that should continue to be the leader of the complex at least until we get through the US Labour day weekend.

[LehmanBr]

Selling of the market continues this morning as world equity markets remain under pressure, and at the end of the day it is the dollar and the equity market that will lead crude up or down as fundamentally crude pricing has not seriously discounted the overall high supply levels for the near term. As such the current trade is based on the recession turn and thus resurgence of economic activity. In the medium term market remains bullish crude oil prices. For the time being however there are defensive players looking to play the current $60-$75 range with a bias to buying dips. The short term view is for a test of 66.6 which needs to hold otherwise a test of 64.69 should be in order. Only a close over 71.72 would lesson the bearish sentiment and once again give us a shot at taking out $75 major resistance. Volatility was under pressure yesterday as we approached the highs but made a slow comeback as prices churned lower. Overall look for volatility to sluggishly rally on price drops with a much lower volatility scenario awaiting us on rallies to the mid $70's.